Loading...

Messages

Proposals

Stuck in your homework and missing deadline? Get urgent help in $10/Page with 24 hours deadline

Get Urgent Writing Help In Your Essays, Assignments, Homeworks, Dissertation, Thesis Or Coursework & Achieve A+ Grades.

Privacy Guaranteed - 100% Plagiarism Free Writing - Free Turnitin Report - Professional And Experienced Writers - 24/7 Online Support

Intermediate accounting chapter 21a solutions pdf

26/12/2020 Client: saad24vbs Deadline: 7 Days

CHAPTER 21


Accounting for Leases


SOLUTIONS TO EXERCISES


EXERCISE 21-1 (15–20 minutes)


(a) This is a capital lease to Adams since the lease term (5 years) is greater than 75% of the economic life (6 years) of the leased asset. The lease term is 831/3% (5 ÷ 6) of the asset’s economic life.


(b) Computation of present value of minimum lease payments: $9,968 X 4.16986* = $41,565


*Present value of an annuity due of 1 for 5 periods at 10%.


(c) 1/1/12 Leased Equipment................................... 41,565 Lease Liability.................................. 41,565


Lease Liability.......................................... 9,968 Cash................................................... 9,968


12/31/12 Depreciation Expense............................. 8,313 Accumulated Depreciation— Capital Leases.............................. 8,313 ($41,565 ÷ 5 = $8,313)


Interest Expense...................................... 3,160 Interest Payable................................ 3,160


[($41,565 – $9,968) X .10]


1/1/13 Lease Liability.......................................... 6,808 Interest Payable....................................... 3,160


Cash................................................... 9,968


Copyright © 2011 John Wiley & Sons, Inc. Kieso,     Intermediate Accounting, 14/e, Solutions Manual (    For Instructor Use Only) 21-1


EXERCISE 21-2 (20–25 minutes)


(a) To Brecker, the lessee, this lease is a capital lease because the terms satisfy the following criteria:


1. The lease term is greater than 75% of the economic life of the leased asset; that is, the lease term is 831/3 % (50/60) of the economic life.


2. The present value of the minimum lease payments is greater than 90% of the fair value of the leased asset; that is, the present value of $10,515 (see below) is 96% of the fair value of the leased asset:


(b) The minimum lease payments in the case of a guaranteed residual value by the lessee include the guaranteed residual value. The present value therefore is:


Monthly payment of $250 for 50 months........... $ 9,800 Residual value of $1,180...................................... 715 Present value of minimum lease payments....... $10,515


(c) Leased Equipment....................................................... 10,515 Lease Liability....................................................... 10,515


(d) Depreciation Expense................................................. 186.70 Accumulated Depreciation—Capital Leases................................................................ 186.70 [($10,515 – $1,180) ÷ 50 months = $186.70]


(e) Lease Liability.............................................................. 144.85 Interest Expense (1% X $10,515)................................ 105.15


Cash....................................................................... 250.00


EXERCISE 21-3 (20–30 minutes)


Capitalized amount of the lease: Yearly payment........................................................... $90,000 Executory costs.......................................................... (3,088 ) Minimum annual lease payment................................ $86,912


21-2 Copyright © 2011 John Wiley & Sons, Inc. Kieso,     Intermediate Accounting, 14/e, Solutions Manual (    For Instructor Use Only)


EXERCISE 21-3 (Continued)


Present value of minimum lease payments $86,911.86 X 6.32825 = $550,000.00


1/1/13 Leased Buildings............................................. 550,000 Lease Liability.......................................... 550,000


1/1/13 Executory Costs................................................ 3,088 Lease Liability.................................................. 86,912


Cash........................................................... 90,000


12/31/13 Depreciation Expense..................................... 55,000 Accumulated Depreciation— Capital Leases...................................... 55,000 ($550,000 ÷ 10)


12/31/13 Interest Expense (See Schedule 1)........................................... 55,571


Interest Payable........................................ 55,571


1/1/14 Executory Costs................................................ 3,088 Interest Payable............................................... 55,571 Lease Liability.................................................. 31,341


Cash........................................................... 90,000


12/31/14 Depreciation Expense..................................... 55,000 Accumulated Depreciation— Capital Leases...................................... 55,000


12/31/14 Interest Expense.............................................. 51,810 Interest Payable........................................ 51,810


Copyright © 2011 John Wiley & Sons, Inc. Kieso,     Intermediate Accounting, 14/e, Solutions Manual (    For Instructor Use Only) 21-3


EXERCISE 21-3 (Continued)


Schedule 1 KIMBERLY-CLARK CORP. Lease Amortization Schedule


(Lessee)


Date


Annual Payment Less


Executory Costs


Interest (12%) on Liability


Reduction of Lease Liability Lease Liability


1/1/12 $550,000 1/1/12 $86,912 $ 0 $86,912 463,088 1/1/13 86,912 55,571 31,341 431,747 1/1/14 86,912 51,810 35,102 396,645


EXERCISE 21-4 (20–25 minutes)


Computation of annual payments Cost (fair value) of leased asset to lessor.................................. $240,000.00 Less: Present value of salvage value


(residual value in this case) $16,000 X .82645 (Present value of 1 at 10% for 2 periods)........................ 13,223.20


Amount to be recovered through lease payments.................... $226,776.80


Two periodic lease payments $226,776.80 ÷ 1.73554*.............. $130,666.42


*Present value of an ordinary annuity of 1 for 2 periods at 10%


KRAUSS LEASING COMPANY (Lessor) Lease Amortization Schedule


Date


Annual Payment Less Executory


Costs


Interest on Lease


Receivable


Recovery of Lease


Receivable Lease


Receivable


1/1/13 $240,000.00 12/31/13 $130,666.42 *$24,000.00 $106,666.42 133,333.58 12/31/14 130,666.42 * 13,332.84* 117,333.58 16,000.00


*$37,332.84


21-4 Copyright © 2011 John Wiley & Sons, Inc. Kieso,     Intermediate Accounting, 14/e, Solutions Manual (    For Instructor Use Only)


*Difference of $.52 due to rounding.


Copyright © 2011 John Wiley & Sons, Inc. Kieso,     Intermediate Accounting, 14/e, Solutions Manual (    For Instructor Use Only) 21-5


EXERCISE 21-4 (Continued)


(a) 1/1/13 Lease Receivable......................... 240,000.00 Equipment............................ 240,000.00


12/31/13 Cash ($130,666.42 + $7,000)....... 137,666.42 Executory Costs Payable.... 7,000.00 Lease Receivable................. 106,666.42 Interest Revenue.................. 24,000.00


12/31/14 Cash.............................................. 137,666.42 Executory Costs Payable.... 7,000.00 Lease Receivable................. 117,333.58 Interest Revenue.................. 13,332.84


(b) 12/31/14 Cash.............................................. 16,000.00 Lease Receivable................. 16,000.00


EXERCISE 21-5 (15–20 minutes)


(a) Because the lease term is longer than 75% of the economic life of the asset and the present value of the minimum lease payments is more than 90% of the fair value of the asset, it is a capital lease to the lessee. Assuming collectibility of the rents is reasonably assured and no important uncertainties surround the amount of unreimbursable costs yet to be incurred by the lessor, the lease is a direct financing lease to the lessor.


The lessee should adopt the capital lease method and record the leased asset and lease liability at the present value of the minimum lease payments using the lessee’s incremental borrowing rate or the interest rate implicit in the lease if it is lower than the incremental rate and is known to the lessee. The lessee’s depreciation depends on whether ownership transfers to the lessee or if there is a bargain purchase option. If one of these conditions is fulfilled, amortization would be over the economic life of the asset. Otherwise, it would be depreciated over the lease term. Because both the economic life of the asset and the lease term are three years, the leased asset should be depreciated over this period.


21-6 Copyright © 2011 John Wiley & Sons, Inc. Kieso,     Intermediate Accounting, 14/e, Solutions Manual (    For Instructor Use Only)


EXERCISE 21-5 (Continued)


The lessor should adopt the direct-financing lease method and replace the asset cost of $75,000 with Lease Receivable of $75,000. (See schedule below.) Interest would be recognized annually at a constant rate relative to the unrecovered net investment.


Cost (fair value of leased asset)............................................... $75,000


Amount to be recovered by lessor through lease payments................................................................................. $75,000


Three annual lease payments: $75,000 ÷ 2.53130*................ $29,629


*Present value of an ordinary annuity of 1 for 3 periods at 9%.


(b) Schedule of Interest and Amortization


Rent Receipt/ Payment


Interest Revenue/ Expense


Reduction of Principal


Receivable/ Liability


1/1/13 — — — $75,000 12/31/13 $29,629 *$6,750* $22,879 52,121 12/31/14 29,629 4,691 24,938 27,183 12/31/15 29,629 2,446 27,183 0


*$75,000 X .09 = $6,750


EXERCISE 21-6 (15–20 minutes)


(a) $38,514 X 5.7122* = $220,000


*Present value of an annuity due of 1 for 8 periods at 11%.


(b) 1/1/13 Lease Receivable................................. 220,000 Cost of Goods Sold............................. 170,000


Sales Revenue............................. 220,000 Inventory....................................... 170,000


1/1/13 Cash...................................................... 38,514 Lease Receivable......................... 38,514


Copyright © 2011 John Wiley & Sons, Inc. Kieso,     Intermediate Accounting, 14/e, Solutions Manual (    For Instructor Use Only) 21-7


EXERCISE 21-6 (Continued)


12/31/13 Interest Receivable.............................. 19,963 Interest Revenue [($220,000 – $38,514) X .11].... 19,963


EXERCISE 21-7 (20–25 minutes)


(a) This is a capital lease to Woods since the lease term is 75% (6 ÷ 8) of the asset’s economic life. In addition, the present value of the minimum lease payments is more than 90% of the fair value of the asset.


This is a capital lease to Palmer since collectibility of the lease payments is reasonably predictable, there are no important uncertainties surrounding the costs yet to be incurred by the lessor, and the lease term is 75% of the asset’s economic life. Because the fair value of the equipment ($200,000) exceeds the lessor’s cost ($150,000), the lease is a sales- type lease.


(b) Computation of annual rental payment:


= $41,452


**Present value of $1 at 11% for 6 periods. **Present value of an annuity due at 11% for 6 periods.


(c) 1/1/12 Leased Equipment................................ 190,877 Lease Liability ($41,452 X 4.60478)***............... 190,877


Lease Liability....................................... 41,452 Cash................................................ 41,452


***Present value of an annuity due at 12% for 6 periods.


12/31/12 Depreciation Expense.......................... 31,813 Accumulated Depreciation— Capital Leases ($190,877 ÷ 6 years).................. 31,813


Interest Expense................................... 17,931 Interest Payable ($190,877 – $41,452) X .12........ 17,931


21-8 Copyright © 2011 John Wiley & Sons, Inc. Kieso,     Intermediate Accounting, 14/e, Solutions Manual (    For Instructor Use Only)


EXERCISE 21-7 (Continued)


(d) 1/1/12 Lease Receivable............................... 200,000* Cost of Goods Sold........................... 144,654**


Sales Revenue........................... 194,654*** Inventory..................................... 150,000


* *($41,452 X 4.6959) + ($10,000 X .53464) **$150,000 – ($10,000 X .53464)


***$41,452 X 4.6959


Cash.................................................... 41,452 Lease Receivable....................... 41,452


12/31/12 Interest Receivable............................ 17,440 Interest Revenue [($200,000 – $41,452) X .11].... 17,440


EXERCISE 21-8 (20–30 minutes)


(a) The lease agreement has a bargain-purchase option and thus meets the criteria to be classified as a capital lease from the viewpoint of the lessee. Also, the present value of the minimum lease payments exceeds 90% of the fair value of the assets.


(b) The lease agreement has a bargain-purchase option. The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lease, therefore, qualifies as a capital-type lease from the view- point of the lessor. Due to the fact that the initial amount of lease receivable (net investment) (which in this case equals the present value of the minimum lease payments, $81,000) exceeds the lessor’s cost ($65,000), the lease is a sales-type lease.


(c) Computation of lease liability: $18,829.49 Annual rental payment X 4.16986 PV of annuity due of 1 for n = 5, i = 10% $78,516.34 PV of periodic rental payments


Copyright © 2011 John Wiley & Sons, Inc. Kieso,     Intermediate Accounting, 14/e, Solutions Manual (    For Instructor Use Only) 21-9


EXERCISE 21-8 (Continued)


$ 4,000.00 Bargain-purchase option X .62092 PV of 1 for n = 5, i = 10% $ 2,483.68 PV of bargain purchase option


$78,516.34 PV of periodic rental payments + 2,483.68 PV of bargain-purchase option $81,000.00* Lease liability


*rounded


GILL COMPANY (Lessee) Lease Amortization Schedule


Date


Annual Lease Payment Plus


BPO


Interest (10%) on Liability


Reduction of Lease Liability

Homework is Completed By:

Writer Writer Name Amount Client Comments & Rating
Instant Homework Helper

ONLINE

Instant Homework Helper

$36

She helped me in last minute in a very reasonable price. She is a lifesaver, I got A+ grade in my homework, I will surely hire her again for my next assignments, Thumbs Up!

Order & Get This Solution Within 3 Hours in $25/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 3 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

Order & Get This Solution Within 6 Hours in $20/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 6 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

Order & Get This Solution Within 12 Hours in $15/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 12 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

6 writers have sent their proposals to do this homework:

Homework Guru
Top Essay Tutor
University Coursework Help
Helping Hand
Writer Writer Name Offer Chat
Homework Guru

ONLINE

Homework Guru

Hi dear, I am ready to do your homework in a reasonable price and in a timely manner.

$112 Chat With Writer
Top Essay Tutor

ONLINE

Top Essay Tutor

I have more than 12 years of experience in managing online classes, exams, and quizzes on different websites like; Connect, McGraw-Hill, and Blackboard. I always provide a guarantee to my clients for their grades.

$115 Chat With Writer
University Coursework Help

ONLINE

University Coursework Help

Hi dear, I am ready to do your homework in a reasonable price.

$112 Chat With Writer
Helping Hand

ONLINE

Helping Hand

I am an Academic writer with 10 years of experience. As an Academic writer, my aim is to generate unique content without Plagiarism as per the client’s requirements.

$110 Chat With Writer

Let our expert academic writers to help you in achieving a+ grades in your homework, assignment, quiz or exam.

Similar Homework Questions

I need 2500 words report on Fashion Business Model Research - Australian rainfall and runoff a guide to flood estimation - The percentage method aids in calculating: - 3 lions and 3 wildebeest riddle answer - Dank of america blaine menu - How to make single phase induction motor self starting - The Respiratory System - Retained earnings are occasionally restricted - Coaching exercise - Book Marketing Services Took My Sales to the Next Level! - African American Essays - Memory management unit ppt - Sheffield & district junior football - What makes a job satisfying - A senior accounting major at midsouth state university - The outsiders chapter summaries - Why does alka seltzer fizz in water - Wake duncan with thy knocking meaning - Red bull demographic segmentation - Functional language lesson plan - Poor listening skills are more often the result of - Interpretive simulations entrepreneur - Why it fumbles analytics - IA week8 DB - Bob jane t mart darwin - Axa actuarial graduate scheme - Complexity Science - Study guide and intervention trigonometry - MKT 630 DQ2 - Discussions(SPORT AND SOCIETY) - Car rental system project in c programming - Organizational network analysis course - Discussion Board 4.2: "Shaping" My Professional Development - How to say australia in hiragana - Fuzzy clifftop star coins - Murdoch assignment cover sheet - Maya angelou champion of the world full text - Language testing and assessment ppt - Malmesbury school staff list - 11 smith place mount annan - Separation and purification of organic compounds experiment - Direct filling gold in dentistry - Anti condensation heater switchboard - Why does cryptography software fail - Case study writing format - A passageway connecting neighboring osteocytes in an osteon is a - GOVT 480 RESEARCH PAPER FINAL SUBMISSION DUE 10/11/2020 - Violence on college campuses essay - Campbell st primary school - Andrew driggs attorney las vegas - Organizational Analysis Paper - Does macbeth kill banquo - 24/7 gatorbait message board - V for vendetta creedy - How to calculate total physical product - Designing a yarning circle - I need help with a writing assignment in Managerial 301 - Synthesis of tin ii iodide - MBA - Main - Activity 2 - Ride with the mob hum do allah - Reflection of a bollywood film and 2 readings - Write a 500 word essay - Stylestics - Digital scale calibration instructions - St ignatius uniform shop - What are the five process groups of project management - Weighted competitive strength assessment under armour - Three beads are placed along a thin rod - William bradford norton anthology american literature - C1 - Series and parallel resistors lab report - Me talk pretty one day key points - Glasgow university medical elective - 601 uno bus timetable - Gcse science p3 revision - Nursing care plan for ineffective tissue perfusion - 7 habits of highly effective people sharpen the saw - Threat Modeling - Wk1 DQ - Data Analysis & Business Intelligence - Gentra puregene blood kit - Benchmark assignment risk and quality management paper - Ap physics reference sheet - Ucsd mgt 18 - Gcse music structure and form - Nurs495 journal - Law of cosines derivation - Nonverbal communication - Access Control discussion 2 - Snhu ba general studies concentrations - CHRISTIAN SERVANT LEADERS - Sandlands wine for sale - Issuing a note payable is an asset source transaction - Accounting 16 5 mastery problem - Ecu bachelor of paramedical science - Cryptic christmas picture quiz - Sp racing f3 flight controller wiring - Separation of a mixture lab answers - Smiths fuel gauge wiring diagram - Flood relief application form - Small motorised boat crossword clue